It's not just F-Squared and its former chief feeling the effects of their performance-reporting and back-testing scandal.

Sanders Wommack of RIABiz offers a deep-dive into what the SEC's attack on F-Squared and former F-Squared chief Howard Present means for Virtus [profile], the mutual fund shop that F-Squared subadvises for. The article is Wommack's latest must-read for any fundster following the F-Squared saga. And the question at the center of the article is, what did Virtus know?

The public side of the scandal began in September 2014 when F-Squared, amidst a big jump in assets, revealed that it had received a Wells notice from the SEC about the performance record of F-Squared's flagship AlphaSector quantitative U.S. equity strategies. At the time, F-Squared subadvised five Virtus funds with $13 billion in combined assets under management (out of Virtus' then-$61 billion total AUM), and within days Virtus' shares fell nearly 20 percent. F-Squared replaced Present two months later, then settled with the SEC for $35 million. Yet the SEC's case against Present himself is still open. Through it all, different broker-dealers have been figuring out how to handle F-Squared-powered products going forward.

Now RIABiz shifts the lens to Virtus, a publicly-traded mutual fund shop based in Connecticut has been a key F-Squared ally for more than five years. The trade pub says that Virtus "has thus far signaled to investors that there's nothing to be unduly alarmed about." In a filing in November, the fund shop alluded to the F-Squared scandal as being unlikely "to have a material adverse effect on [Virtus'] consolidated financial condition." And on Virtus' Q4 2014 earnings call last month, Virtus CEO George Aylward said, "we're not going to answer any questions related to the sub-advisor or any regulatory matter."

RIAbiz, citing MarketCounsel CEO Brian Hamburger, ponders whether or not Virtus can protect itself in the SEC's still-ongoing investigation. The trade pub also cites four unnamed, former Virtus salespeople who describe a December 14, 2012 Virtus meeting where Present touted AlphaSector's track record as dating back to 2001. Two anonymous sources who were at the meeting told RIABiz that Virtus' then-head of product management chief then told the Virtus employees present to ignore Present's track record comments and that the record was actually from backtesting, not real assets. What's a marketer to do when a PM goes off-script?

The article makes no mention of any subsequent meetings along those lines. Indeed, RIABiz's sources say that none of the Virtus sales people "confronted management" after the meeting, and that Virtus didn't change its sales practices for the F-Squared-powered funds "until late October 2013, after the SEC began its investigation into F-Squared."

The trade pub also notes that in December 2012, the same month as that meeting, Virtus launched three mutual funds powered directly by Newfound Research. Newfound's Corey Hoffstein, at the time a 20-year-old intern, created the quant engine underlying AlphaSector between 2007 and 2008. F-Squared repackaged that engine into a model portfolio. The Newfound-powered Virtus held just $5.33 million as of January 27, two years after launch.&nbsp